Elite universities will be propped up while less well-known institutions are left to wither or close as £1billion of budget cuts hit higher education.

The first round of swingeing £2.7billion cuts to grants given to universities by the Government were announced yesterday with the budget for the 2011 academic year slashed by £940million – 12.6 per cent.

All but one university – the London School of Hygiene and Tropical Medicine – will see real-terms cuts and all but five of the 130 English universities will see a cash-terms reduction.

Bright future: Elite universities such as Oxford will not have their government funding cut, despite plans by the Ministry of Education to slash its spending this year by more than 12 per cent

However, world-renowned, research-intensive universities such as Oxford, Cambridge, the London School of Economics and Imperial College London have been spared the bulk of the pain.

In real terms, taking into account inflationary measures of around 2.4 per cent, they will see either a small increase or a minor decrease of around one per cent in their funding.

Meanwhile, former polytechnics and institutions which predominantly teach ‘soft’ un-academic courses are losing up to 17.8 per cent of their funding.

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The cuts revealed in the data published by the Higher Education Funding Council for England are likely to push a number of struggling universities closer to the brink of closure. It follows the revelation that seven universities are in such a fragile financial state that they are currently on a secret ‘at risk’ register.

A total of 11 have been in the red for more than two years, according to the National Audit Office, and a further 43 have raised serious concerns about their finances.

Business Secretary Vince Cable has said universities will be ‘allowed to fail’ and ‘will not be propped up like the banks’.

The HEFCE announcement will also encourage former polytechnics and lower-ranked universities to charge close to the maximum £9,000 tuition fees in an attempt to claw back funding.

Sally Hunt, of the University and College Union, said the unequal allocation of grants would force universities to close humanities courses and departments.

She added: ‘It is quite clear that some institutions will be in a far better position than others.

‘Certain institutions will be deprived of vital sources of funding, which can only be matched by charging students the highest fees.’